Tower's Japanese wafer fab drives Q3 outlook

LONDON – Tower Semiconductor Ltd., the specialty foundry that trades as TowerJazz, moved into profit in its second quarter financial results and expects to increase sales by 27 percent in the third quarter. The upbeat outlook for Q3 and beyond is driven partly by the acquisition of a manufacturing facility in Nishiwaki, Japan that formerly belonged to Micron Technology Inc.

Tower (Migdal Haemek, Israel) reported a $1.7 million net profit on sales revenue of $139.7 million in 2Q11. This was a marked improvement on the previous quarter for which the company reported a net loss of $5.4 million on revenues of $120.6 million. The 2Q11 revenue was up 16 percent sequentially and up 11 percent compared with 2Q10.

The Japanese fab acquisition, which doubles Tower's manufacturing capacity and makes Micron (Boise, Idaho) a 6 percent shareholder in the foundry, was completed on June 3, 2011, and so had a minor impact in the second quarter. However, it is expected to drive sales revenue in 3Q11 to between $173 million and $183 million, representing a mid-range growth of 32 percent year-over-year and 27 percent growth quarter-over-quarter.

At the end of 2Q11 Tower had $139 million in cash, compared with $198 million at the end of the 1Q11 and $85 million on hand at the end of 2Q10.

"The second quarter of 2011 integrated many fantastic developments in our company. The acquisition of an operational facility in Japan was a strategic corporate directive. And now the Nishiwaki factory opens a new chapter in our company's history," said Russell Ellwanger, CEO of Tower, in a statement. "Our substantially greater capacity will allow us to unleash much additional future growth and enable us to quickly turn our recent strong design-win momentum into products, ramping quickly to volume production. The acquisition also provides us with a very strong foothold in the growing Asia-Pacific market and in Japan in particular. Just as importantly, it cements a long-term partnership with Micron, through both a three year supply agreement and through their becoming a strategic shareholder of our company. The important steps taken in the quarter bring a surer realization of our 2014 goal of becoming a billion dollar-plus company in revenues."